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Queen’s Speech sets out collective DC plans

Plans for collective defined contribution pension schemes have been confirmed in the Queen’s speech.

Speaking in the House of Lords this morning, the Queen also confirmed that legislation will be brought forward to implement radical plans to liberalise the pensions market.

Documents published alongside the speech confirm that tax laws will be changed to allow those over 55 who access their entire DC pension pot to be taxed at their marginal rate and that new anti-avoidance rules will also be introduced to stop people taking advantage of the new pension freedoms for tax purposes.

The Queen said: “Legislation will be brought forward to give those who have saved discretion over the use of their retirement funds. My Governments pensions reforms will also allow for innovation in the private pensions market to give greater control to employees.”

The documents say Dutch-style CDC plans, where members’ contributions are pooled and the pension is paid from the collective fund, will “potentially allow for more stability around pension outcomes”.

The documents say: “The Bill would define schemes in terms of the type of ‘pensions promise’ they offer to the individual as they are paying in. A scheme would be categorised as a defined benefit scheme, a defined ambition (shared risk pension scheme) scheme or a defined contribution scheme, corresponding to the different types of promise – full promise about retirement income a promise on part of the pot or income, or offering no promise at all.”

Experts have raised concerns about moving to CDC schemes, which function in a similar way to traditional with-profits schemes, using extra investment returns in the good times to make up for lower returns in the bad. In the Netherlands, which operates CDC schemes, young people have been protesting against subsidising the pensions of people in retirement because of poor investment returns.

Plans to allow anyone over the age of 55 to take their entire pension pot as cash from April 2015 were originally set out by the Chancellor in March’s Budget.

The other key points in the Queen’s Speech

  • Overall Isa limit to increase to £15,000 from 1 July and that the full amount will be allowed to be held in cash, shares or a combination of the two
  • Collection of national insurance contributions from the self-employed to be simplified.
  • Introduce new powers and penalties against “high-risk” promoters of tax avoidance


  • An updated charter for budget responsibility will be published alongside the Autumn Statement which could include a “stronger Parliamentary commitment” to reducing the deficit, potentially in terms of a percentage of GDP.
  • From January, National Savings and Investment will introduce one and three-year fixed rate savings bonds for over 65s. The final rate will be announced in the Autumn Statement.


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